Off-setting Buy-to-Let Legal & Lender Fees on self assessment. 25 January at 12:33PM edited 25 January at 12:56PM in Cutting tax 2 replies 61 views

hatnezmaturestudent

I have a share of BTL property for 8 years.  In that time, we've had 4 mortgages and have NOT off-set Professional and Legal fees of the mortgages on Annual Self-Assessment tax returns.  Thought we could off-set them against Capital Gains Tax whenever property was sold.  Just found out we can't.

My question is, do we off-set entire amount on SA this year which makes tax return negative or in my favour?   OR, is it best to break up off-setting over 2-3 years? 

Thanks   

Jeremy535897

The situation is quite complex, as the treatment of let residential property finance costs (which includes arrangement fees and other fees directly linked to the raising of the finance) follows the rules you are presumably already applying to the interest paid on the mortgages. For 2017/18 you claimed 75% of finance costs as a deduction and the remaining 25% only entitled you to a basic rate tax credit. For 2018/19 it was 50:50, for 2019/20 it was 25:75 and for 2020/21 onwards you could only claim a basic rate tax credit on finance costs.

You cannot "bunch" finance costs, however tax relief is given, into 2 or 3 years or claim them all in one year. You have to amend your tax returns where you can (2020/21 by 31 January 2023, 2021/22 by 31 January 2024), and write to HMRC to amend the two earlier years. See: https://www.gov.uk/self-assessment-tax-returns/corrections

purdyoaten2

You can’t pick and choose what years to claim any expense against income. The expense is only able to be claimed in the year that it occurred. You are able to amend the return for 2020/21 tax year up to next Tuesday. For the years 2018/19 and 2019/20 you would have to make a claim for overpayment relief. You cannot go back any further than that and, again, have only until 5th April 2023 in order to include 2018/19.

https://www.gov.uk/hmrc-internal-manuals/self-assessment-claims-manual/sacm12005